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ECON 3212 Exchange rate crisis Pick the following exchange rate crises: 1

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ECON 3212 Exchange rate crisis Pick the following exchange rate crises: 1. Russian 1998 crisis For this country explain in 12 pages (including graphs) the following: Block I State when the country chose to have a peg and explain why they did so. Accompany your explanation with appropriate data to support your claims. For example, if the country adopted a peg to keep inflation low, show how inflation was behaving a few years before the peg adoption. Block II Explain whether the peg worked well. For this, present evidence on GDP growth, inflation, money supply or any other graphs you think show well how the economy behaved under the peg. Block III Provide information on the origins on the exchange rate crisis. Were the causes international or domestic or both? Use the ISLM portion of the Mundell-Fleming to explain the effects these forces were supposed to have in the economy (e.g., RER appreciation causing a movement of the IS curve). Block IV What does the country do to maintain the peg? Show how the domestic interest rate moves in this period. Show also the foreign exchange reserves. What does the behavior of the foreign exchange rate reserves tell you about whether the changes in the interest rate was enough to maintain the peg or not? Explain how the crisis ends. Does the country end up devaluing? You don’t need to divide the assignment in these blocks. Just make sure that the information in the essay is the whole timeline of the crisis: from before adopting the peg to after the crisis resolves. Data sources: https://data.worldbank.org/ ECON 3212 Series to consider: • • • • • • GDP growth (annual %) Inflation, GDP deflator (%) Inflation, CPI (%) Total reserves minus gold (total USD) Nominal exchange rate Lending interest rate (%) for interest rate For money supply: • Broad money (current LCU) • Broad money growth (annual %) You will have a higher grade in your assignment if you explain the information using your own words. I am not looking for a wordy explanation inspired too much on Wikipedia (although you can use it as background information). The assignments that are less wordy but use the data to explain the story of an exchange rate crisis will get higher grades. Please show all the sources you use!!!